Watford require approximately £6.5m of funding to make up their shortfall until June 2010.

Jimmy Russo made the revelation in his ‘chairman’s statement’ of Watford Leisure Plc’s final results for the year ending June 30 2009, which was released today.

Russo also conceded the club will have to sell players “year on year” in order to “meet the financial requirements of the business”.

In the annual report released to the stock exchange, Russo said: “We have faced challenging times, most of which have centred around the financial situation which we inherited. It has been
necessary for the company to rely, at times, on the generosity of lenders, including myself and my brother Vince, to provide funds by way of loans to enable us to meet our obligations.

“Whilst this is a short term solution, we have all accepted the need to identify a longer term solution and at the time of writing this report, discussions are ongoing. The board expects that
approximately £6.5 million of funding will be required to make up the shortfall to 30 June 2010.

“It has been necessary to take a long hard look at the manner in which the business was operating and it soon became clear that there were many areas where savings could be made and it is to the
credit of all involved that real progress has been achieved and our efforts are ongoing.

“It is the board's aim to achieve an equalised budget by the end of June 2011 as we are firmly of the view that you cannot spend what you do not have. To do so is fraught with problems as has often
been proved in the past.”

Watford Leisure made a loss of almost £2m for the year ending June 30 2009, compared to a £426,000 profit during the same period last year.

There was a £716,000 rise in revenue for the year, partly due to the £1.55m the club received in loan fees and increased cup match revenue.

However, reduced commercial revenues of £835,000 offset that due to reductions in the likes of ticketing, retail and advertising.

The cost of sales and administrative expenses show a reduction of £2,948,000 - £2,152,000 of which is salary reductions.

But Russo stated: “Further evidence of cost reduction measures taken will be evident in the financial statements for the current financial year as significant work has been undertaken in this area
across both the administrative and playing side of the business.

“The nature of football contracts makes it difficult to transition this cost very quickly as contracts generally cover a two, three or four year period.

“The summer transfer window allowed for some movement and with a number of contracts expiring in June 2010 the real evidence of the 'new' player salary model will not be seen until the 2010/2011
financial statements.”

There were other signs of improvement for Watford, in particular the wage to revenue ratio dropping from 79 per cent last year to 68 per cent.

Other operating income also rose by £537,000, mainly due to the initial £550,000 compensation Reading FC paid for manager Brendan Rodgers.

Gross profit is up by more than £2.8m from £455,000 to £3,287,000 and the company has also paid off a £7m bank loan, although significant loans, mainly from the club’s directors, has had to be
sought to keep the company out of administration.

Russo said: “We should never lose sight of the invaluable work undertaken at an executive level and our thanks are extended to Julian Winter, CEO, in particular for his exceptional commitment since
taking office and to all of his team who have given their total support.

“Everyone that works for the football club should be truly proud of their contribution in challenging times.

“As chairman of the club and on behalf of the board I would like to thank every single member of staff for their commitment and effort, particularly over the last year, as it is their hard work and
expertise that has seen us through a difficult transition as a business and will serve us well in the future.

“Finally, my thanks to our sponsors, customers and our vociferous supporters who never let us down. We genuinely appreciate all as without them there would be no club. We look forward to continued
progress and success in the year ahead.”

Watford’s financial situation meant the club was almost forced to sell a number of their start players in the summer and a further £4.2m net income from transfers will be shown in the 2010 results
next year.

Russo also used the annual report to praise manager Malky Mackay.

He said: “It is imperative that we have a group of players that can more than compete in the Championship.

“However, history has shown us that we have been too generous with players' wages only to find that sometimes these players are no better, and in fact on certain occasions of a lower standard, than
those that we currently have.

“The board is firmly of the belief that the club can survive in the Championship with a mixture of seasoned professionals and younger players who, at this stage of their careers, command lower
salaries.

“I am really pleased with the way that Malky Mackay has conducted himself and has won the respect of all of his staff both playing and non playing.

“He is a true gentleman and a leader amongst men and whilst our expectations would be success year on year, we also have to be realistic as to the challenges that he faces.

“Indeed, having sold and released some 12 players since Easter he has been somewhat restricted as to the amounts of money made available to him. He fully understands his position and was informed
at the time of being appointed.

“Nevertheless, he chooses to work with a small team of good players and, for this, we are grateful to him for his endeavours.”

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